COSCO Subsidiary Buys Back Shanghai Site for $596M

A subsidiary of mainland shipping giant Cosco made Shanghai’s biggest land buy of September when it picked up a 145,800 square metre (1.57 square foot) mixed-use plot in Baoshan district for the auction reserve price of RMB 4.1 billion ($596.2 million), according to an announcement from the city government.

Hong Kong-listed China International Marine Containers (CIMC) paid the equivalent of RMB 8,754 per square metre for the combined commercial, office and residential site in northern Shanghai on Wednesday, and was the sole bidder for the project adjacent to the Meilan Lake station on Shanghai’s metro line seven.

The low-key land auction in the former industrial district in the north of the city came after Baoshan district cancelled two site sales in July as government cooling measures have deterred developers from bidding on all but the choicest plots.

Designing a Project With Staying Power in Northern Shanghai

CIMC’s lack of competition for the northern Shanghai site may come from planning guidelines stipulated in the tender. The site purchase entitles the container maker to build up to 468,500 square metres of space on the former industrial site, including up to 1,370 homes covering just over 140,000 square metres of space.

The project also includes 194,500 square metres of office space and 133,875 square metres of retail. Despite its suburban location, the local authorities seem determined to make the Meilan Lake project a landmark in the area, with the terms of the land sale requiring the developer to hold 40 percent of the office space as rental property for at least 20 years, while 80 percent of the retail space must be held for rental purposes for a similar period.

The head of South and West China Research at Cushman & Wakefield, Zhang Xiaoduan, said that the transaction is part of the city’s land urban renewal efforts aimed at converting former industrial sites to commercial use.

Some fifty percent of the total residential space must be fully decorated before sale, and 15 percent of the residential portion of the project must be committed to rental housing.

Shipping Firm Gets Its Old Base Back

The land acquisition may be something of a homecoming for CIMC, which previously owned the then-industrial site via a subsidiary until selling it to the government in 2016 as part of an urban renewal campaign.

“[The acquisition] is important for image building and strategic development for the company in the Eastern China,” the group said in a statement to the Shenzhen Exchange regarding the land buy.

CIMC acquired another site in the area earlier this year for a residential development at a cost of RMB 4,550 per square metre.

Sold at the Auction Reserve Price

The low level of response for the Baoshan site sale is primarily due to the government’s restrictions about the development of the plot as well as to tighter cash flow in the industry, according to Cushman & Wakefield’s Zhang.

“The government has its regulation target for the property sales and it wants to cool down the land market,” Zhang told Mingtiandi. The emergence of the “land kings”, or record-high transactions, are seen as heating up the market and driving home price increases.

In July Baoshan had scheduled the sale of a 56,974 square metre site residential site with an auction reserve price of RMB 2.63 billion, as well as putting on the block a 2,004 square metre commercial site. Both land sales were cancelled without the government providing an explanation.

Also during July, Shanghai authorities cancelled other land sales in Qingpu and Minhang districts, while the auction of a site in Xuhui district on August 1st attracted only one bidder.